EDDIE BARNES

AN INDEPENDENT Scotland would need to free itself from the pound and UK monetary policy if it wanted to cut the wealth gap between rich and poor, a leading centre-left think-tank has argued in a major new report.

The paper, written by the Scotland Institute, warns it is “implausible” to see how a newly-independent Scotland could introduce radical measures to slash inequality if it remained “tied” to the Bank of England.

The SNP has proposed that Scotland sticks with sterling, with London continuing to set interest rates, with the current “monetary union” remaining in place.

But left-wing independence backers said last night that the institute’s findings underlined their fears that the SNP’s strategy would fail to change the current path to austerity and rising poverty.

The report comes a week after Deputy First Minister Nicola Sturgeon used a major speech to argue that the SNP’s plan for independence would give the country “the tools we need” to cut inequality and social exclusion.

The paper by the Scotland Institute, funded by Scottish academic Azeem Ibrahim, and supported by former SNP minister Jim Mather, and Labour MP Alistair Darling, readily agrees with Sturgeon’s assessment that successive Labour and Conservative administrations at Westminster had allowed a wealth gap to widen since the 1970s.

It reveals devastating figures showing how people are being locked in by their surrounding circumstances. Children in the very poorest regions in Scotland account for 60 per cent of low educational attainment in the country, it reveals. The report also finds that 60 per cent of all recorded poor health in Scotland is contained within these same areas. Such inequality is worsening the economic crisis, it argues, with poorer families unable to spend and stimulate demand.

If the country wants to act on the scandal of inequality, the report argues, “it cannot be dealt with by simply adding in some elements of redistribution”. Instead, “it means creating an economic and legal system” designed to do so.

But turning to independence, the paper, written by its research director Roger Cook, argues: “If Scotland remains tied to UK-wide economic policy, and if that continues to set primarily to meet the needs of the City of London, then the best that can be achieved is a set of policies that will mitigate the worst effects.

“If, as currently suggested, independence means retaining sterling, then that independence will preclude the ability to create a genuinely different economic model.” It adds: “If Scotland opts for independence, but leaves key issues such as monetary policy to Westminster (ie it retains sterling) it is implausible to see how the necessary policies can be developed.”

Ibrahim, executive chairman of the Scotland Institute, said last night: “The report confirms that it is not possible to isolate society as a whole from the problems that arise if social exclusion is not addressed.”

The institute’s warning about the continued use of sterling after secession last night prompted both pro-and anti-independence critics to question the proposals.

On the warning about independence, a spokesman for Radical Independence Convention said: “There are two big messages in this report. First, that Britain has failed an enormous number of its own citizens who haven’t gained their share of economic growth and, second, that no-one believes that a monetary policy made by London bankers for London bankers will ever change that.”

Drew Smith, Scottish Labour social justice spokesman, added: “It simply doesn’t make sense to leave monetary policy in the hands of a foreign country which you have no power or influence over and those of us who believe in social justice know that independence on these terms will only set us further back.”

However, a spokesman for the Scottish Government argued that by, for example, transferring welfare policy to Scotland, Edinburgh would still be able to develop a “fair system” for those worse off.